Canadian homeowners facing mortgage renewal are being thrust into the spotlight as the Bank of Canada’s latest rate cut triggers new questions and opportunities.
When the Bank of Canada sliced its overnight benchmark by 25 basis points, dropping it to 2.5 per cent, it left a mark on the country’s mortgage landscape. According to the Bank’s own data, about 60 per cent of mortgages will need renewal in 2025 and 2026. The implications are far-reaching for borrowers across Canada, especially those weighing their next move.
Lenders peg their rates to the central bank’s policy rate, meaning variable-rate mortgages have responded quickly. As Clay Jarvis, a mortgage expert at NerdWallet Canada, observed, variable options have fallen by up to 30 basis points at some lenders. The catch: the best deals are often reserved for new clients, not loyal ones.
For homeowners tempted by a variable rate, the allure is clear—rates have dipped below four per cent at certain brokerages. Yet this isn’t a one-way street. As Jarvis cautioned, the central bank’s cuts won’t last forever. “Once the BoC is done cutting rates, they’ll eventually have to start increasing them.” Those wary of risk may prefer the predictability of fixed rates, now also widely available under four per cent.
The decision hinges on personal circumstances. Leah Zlatkin, a broker at LowestRates.ca, pointed out that variable mortgages offer more flexibility for those planning a move, given lower penalties for breaking early. Fixed rates are suited for those seeking stability over the next three to five years. Either way, she recommends starting the renewal process at least four months before the current term ends.
Loyalty to one’s mortgage lender comes at a cost. Penelope Graham of Ratehub.ca noted that most Canadians stick with their current provider, but this often means paying more than necessary. The banking regulator’s recent rule changes have made it easier to switch lenders, potentially saving homeowners thousands over a five-year term.
Mortgage renewal now demands strategy. With rates shifting and incentives changing, Canadian homeowners who shop around and understand their options will be best positioned in a volatile market.
References:
Renewing your mortgage? What the Bank of Canada’s rate cut means for you
